Author Box
Articles Categories
All Categories
Articles Resources

ETF Versus Mutual Funds - What's The Difference?

March 05, 2012 | Comments: 0 | Views: 79

ETF Versus Mutual Funds

When comparing exchange traded funds, or ETF versus mutual funds, going in properly informed will make all the difference. Understanding the way that both funds work will be the key to deciding which one best suits your strategy for investing. Before you can make a decision, you need to know what exactly your goals are in investing. What kind of risks are you capable of handling? What asset classes do you want to be exposed to? It's easier to select an investment tool when you already have parameters set up. Once you know your investment needs, you'll be able to properly decide which of an ETF versus mutual fund is right for you.

ETF And Mutual Fund Breakdown

If you're a novice investor going about things in the traditional way, reallocating strategically, you might enjoy how simple a fund can be. While ETFs are known for their accessibility as well, they are more for those who would take advantage of being able to trade their shares throughout the day, much like a regular stock. The lower expense ratio of an ETF and the immediacy with which they can be traded at is often used as leverage by institutional investors for directional bets and hedge investments. Mutual funds are traded during Wall Street's hours, but the actual transition won't occur until the market has closed. The price of a fund is found by calculating the sum of the stock prices within the fund.

The Downside Of ETFs

In the battle of ETFs against funds, dollar-cost averaging investors will begin to note how expensive ETFs can become due to brokerage fees. A way to save money in the long run is to invest in a buy-and-hold ETF, but conversely, this exposes investors to something called tracking error. While ETFs are classified as a type of fund, making them liable to the Securities and Exchange Commission's regulations, they are more complex in their structure, and are under the influence of more rules than funds. Trading well with ETFs makes it important that an investor be well-versed in index funds, as that is what ETFs are largely made out of.

Choosing Between ETFs And Mutual Funds

These situations are just a few of the variables that you should take into consideration when deciding on an ETF versus mutual fund. You have a large number of choices available to you, and by deciding on your preferred amount of exposure, you can slim your options down to only the best for you.

Connor Swinney is the owner of the What Are Mutual Funds website. He created the website to be used as a resource for people who are looking for more information on Best Mutual Funds or that would like to know how they can create a successful investment strategy.

Source: EzineArticles
Was this Helpful ?

Rate this Article

Article Tags:

Mutual Funds


Etf Versus Mutual Fund



Forex dealing is dealing in currency trading and basically includes dealing in foreign exchange while the stock market dealing is the dealing of stock in a standard market market. The two types of

By: Anil Mali l Investing > Stocks l October 25, 2012 lViews: 245

Investments in silver metal can be done by several ways. The article talks about the best ways of silver investments. Silver, the precious metal has always attracted investors for several reasons.

By: Kyles Humphrey l Investing > Gold Silver l August 17, 2012 lViews: 305

The article offers reasonable reasons for high oil prices. Crude is indispensable and it is a great source of energy. The prices on oil keep on altering, sometimes it is too high and sometimes it

By: Kyles Humphrey l Investing > Stocks l August 17, 2012 lViews: 286

Many investors are unaware of new tax that will be levied as part of the Supreme Court’s decision to uphold President Obama’s health care reform. The investment tax, as it is being referenced,

By: Ben Esget l Investing > Retirement Planning l July 17, 2012 lViews: 405

A few months ago, I was at Starbucks talking to someone about stocks and bonds, he and his wife had worked hard and were worried about the stock market. They wanted something much less risky. He

By: Lance Winslow l Investing > Stocks l July 11, 2012 lViews: 434

The first step in the risk management process is to acknowledge the reality of risk. Denial is a common tactic that substitutes deliberate ignorance for thoughtful planning.

By: Lawrence Tepper l Investing > Retirement Planning l July 10, 2012 lViews: 240

According to financial experts, mutual funds shouldn't be selected merely on the basis of past performance and fundamental analysis of indices. First of all, you need to understand that investments

By: Shabbir Bhimanil Investing > Mutual Fundsl June 16, 2012 lViews: 190

Mutual funds are a type of certified managed combined investment schemes that gathers money from many investors to buy securities. There is no such accurate definition of mutual funds, however the

By: Vaibhav Bhadangel Investing > Mutual Fundsl June 06, 2012 lViews: 223

Mutual fund investments can give investors high returns when they succeed in choosing the best mutual funds. The best mutual funds are those that facilitate diversified and multiple stocks purchase,

By: Wayne A Gormanl Investing > Mutual Fundsl May 30, 2012 lViews: 213

Past performance isn't a proper indication of future overall performance. A poor-performing fund which had massive deficits in one year shouldn't be considered to do similarly in the subsequent year,

By: Alisia Matthewsl Investing > Mutual Fundsl May 25, 2012 lViews: 192

In case you are wondering if there are risks in investing, the answer is yes. Although investing in a cash ISA involves little risk, there are higher risks involved with regards to stocks and shares

By: Gert Hael Investing > Mutual Fundsl May 22, 2012 lViews: 204

There are many advertisements offering to sell you techniques labelled how to make money the easy way but the experts know that these get rich quick schemes are a sham; just a way to separate any

By: Jack Ritchiesl Investing > Mutual Fundsl May 21, 2012 lViews: 346

Are you interested in investing in foreign currency mutual funds? This can be a very successful investment, but first you must take the proper steps to educate yourself as to what you'll be getting

By: Connor Swinneyl Investing > Mutual Fundsl March 22, 2012 lViews: 211

Alternative investment mutual funds are mutual funds that invest in assets aside from traditional investments, such as money market instruments, stocks, and bonds. These investment vehicles are

By: Connor Swinneyl Investing > Mutual Fundsl March 12, 2012 lViews: 180

High dividend mutual funds are distinct in that the companies who run them choose to only invest in high yield dividend stocks. These kinds of investments can be a great way to save for retirement,

By: Connor Swinneyl Investing > Mutual Fundsl March 12, 2012 lViews: 163

So, you've heard that it's important to check out a mutual fund expense ratio before investing in one. But what makes that so important? A mutual fund expense ratio is a glimpse at how much money is

By: Connor Swinneyl Investing > Mutual Fundsl March 12, 2012 lViews: 170

There are many investors who are in search of the top 10 mutual funds to buy from the past year. The year 2011 saw another year where just about everything in the investment world worked out smoothly.

By: Connor Swinneyl Investing > Mutual Fundsl March 12, 2012 lViews: 162

The most typical kind fund offered by investment providers is an open ended mutual fund. What makes an open ended fund open ended is the fact that the amount of investors, shares, and fund size in

By: Connor Swinneyl Investing > Mutual Fundsl March 12, 2012 lViews: 176

Discuss this Article

comments powered by Disqus